Private Debt Fundraising Slows For Second Consecutive Quarter

Private Debt Fundraising Slows For Second Consecutive Quarter by Preqin

Twenty-five funds closed in Q1 2015, raising a total of $16.5bn in capital, compared with 26 funds that raised $20.8bn in Q1 2015; this represents a further fall in fundraising from Q4 2014.

Fundraising in the private debt market has slowed over recent quarters. Twenty-five funds closed in Q2, raising a total of $16.5bn in capital, compared with 26 funds that raised $20.8bn in Q1 2015. This is a further drop from the $23.0bn raised in Q4 2014, and marks the lowest Q2 figure since 2012, when 23 funds raised $8.4bn. Despite the final quarter of 2014 seeing one of the largest amounts of capital raised in recent quarters, full-year fundraising for 2014 was significantly lower than that in 2013 ($68bn compared with $79bn), adding further evidence to a slowdown in fundraising activity.

Other Key Private Debt Industry Facts:

At the start of Q3 2015, there are currently 257 private debt funds in market, seeking a total of $130bn. This is up from 237 funds seeking $122bn at the start of Q2.

Distressed debt fundraising has seen a notable increase in market share. While these funds accounted for only 16% of private debt funds closed in Q2, they accrued 32% of the capital raised, up from 6% and 0.3% respectively in Q1.

Direct lending funds still account for the largest part of the private debt market, representing 36% of funds closed in Q2, and 39% of the capital raised. Conversely mezzanine funds, while also representing 36% of those closed in Q2, only raised 10% of the total capital.

Of the 10 largest private debt funds that closed in Q2, four were distressed debt funds, including the largest – CVI Credit Value Fund III raising $3bn. Furthermore, six of the 10 largest funds in market at the start of Q3 are distressed debt funds.

Dry powder levels hit a record high of $179bn as at the end of Q2. Direct lending funds have seen an increase of 45% from December 2014 in the levels of capital available for new investments, while Europe-focused debt funds have seen an increase of 51%.

Of the funds currently in the market, 41% have been on the road for more than 18 months, an increase of six percentage points from last quarter. At the same time, the proportion of funds that have been in market for less than six months has dropped from 29% in Q1 to only 21% in Q2.

To view further analysis and commentary on Q2 2015 private debt activity, please see the following link:

“The second quarter of 2015 saw a further slowdown in the amount of capital being raised by private debt funds, after Q1 figures failed to match those from the last quarter of 2014. After a record year for fundraising in 2013, 2014 saw a notable drop in the amount of capital raised, and these figures represent a further slowdown. One possible explanation for the falling fundraising levels is the build-up of dry powder. With unspent capital now at record levels, investors may be hesitant about committing to new funds until they see existing investments deployed into viable opportunities.”